TMI Blog1972 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the Companies Act, 1956. For the purpose of proceedings relating to the assessment of the company under the Act, the previous year of the petitioner at all material times was the calendar year ending on December. The petitioner, however, was desirous of changing its accounting year commencing from January to December to the period from June to May. For that purpose it wrote to the Income-tax Officer, respondent No. 1, by means of its letter dated January 8, 1970, that it intended to change its accounting year from 1st of January to 31st May, 1970, and thereafter every year on 31st May instead of 31st December. It, therefore, requested that it may be given the permission to close the accounting year commencing from 1st January, 1970, to 31st May, 1971. This approval was sought for under section 3(4) of the Act for changing the next accounting year, i.e., year commencing on November 1, 1970, to end on 31st May, 1970, or 31st May, 1971, as desired by the Income-tax Officer. The Income-tax Officer sought certain information from the petitioners about the profits for 12 months ending on 31st December, 1969, and the expected profit from 31st January, to 31st May, 1970. This inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in view of the facts of the case the Board declined to interfere with the matter. It is thereafter that the present writ petition has been filed challenging the order of respondent No. 1 dated May 8, 1970, and the order of respondent No. 2 dated July 13, 1971, by which they refused permission to the petitioner to change the meaning of the previous year as applicable to it at present. The " previous year " is defined in section 3 of the Act to mean the financial year immediately preceding the assessment year or if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date. Section 2(9) of the Act defines the assessment year to mean the period of twelve months commencing on the 1st day of April every year. Tax is levied for each financial year commencing on the 1st April at the rate or rates prescribed under the Finance Act and is a charge on the total income of the financial year. The assessee has been given the option to choose his accounting year ending on any day within the preceding financial year as his previous year. But, once he has exercised his option then by vir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondents, Mr. Sharma, that the discretion of the Income-tax Officer under section 3(4) was so unfettered that his decision was not subject to challenge by means of writ proceedings under any circumstances. Stated so broadly, the contention is plainly untenable. No doubt it is for the Income-tax Officer to decide whether to exercise his discretion in favour of the assessee under section 3(4) of the Act, but it cannot be accepted that this discretion evert if exercised arbitrarily and capriciously, is beyond the scrutiny of this court. Of course this court will not substitute its own opinion or discretion for that of the Income-tax Officer. But, if the assessee is able to show that this discretion has been exercised in a mala fide or arbitrary manner or on extraneous considerations the same will be subject to challenge under article 226 of the Constitution. But, simply because the Income-tax Officer has not chosen to agree to the terms offered by the petitioner does not necessarily mean that he has acted arbitrarily or capriciously. It is to be remembered that the purpose of the Act is to levy tax and to collect the same. The interest of the revenue is uppermost. It is obv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the respondents had offered during the course of arguments that if the petitioner-company wanted to change the meaning of its " previous year " from December to any time up to the end of March, the department would have no objection. This concession was offered so that the company if it had genuine difficulty in holding the meeting in June could vary the of " previous year " to March and thus be able to hold the meeting six months thereafter, i.e., by September. But he, however, strongly contended that the whole purpose of changing the meaning of the previous year from December to May was to get the benefit of postponing the time for the payment of advance tax and the further postponement of the period for being assessed. In the affidavit filed in return by the Income-tax Officer, it has also been stated that the reasons given for the change of the " previous year " are reasons which are common to every company which is subject to income-tax and company regulations and for identical circumstances and rather subject to identical obligation and that if the petitioner's reasoning is carried to its logical conclusion, it would follow that it would not be possible for any company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1972-73. It was also denied that the petitioner was asked to waive the interest in respect of any refund that may be due under section 141A of the Act for the assessment year 1971-72. On the other hand this is stated to be a suggestion put forward by the petitioner himself. It is definitely asserted that the department examined the various proposals put forward by the petitioner but that it was found that if the change in the meaning of the expression " previous year " was to be allowed there would accrue substantial loss to the revenue every year because the petitioner would be in a position to defer the payment of advance tax by a period of 7 months year after year. It is not as if the suggestion by the respondent that by the change in the meaning of the " previous year " the petitioner will benefit by not paying the advance tax in the current year and postponement of the determination of tax is without any basis will be clear by making a reference to the statements filed by the petitioner itself (as annexure " k " in C.W 996/71 and annexure " L " in C.W. 997/71). In the statement, annexure " K ", it is stated that advance tax paid for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " has not been permitted is the consideration of the interest of the revenue. It cannot be urged with any seriousness by petitioner that the consideration of the interest of revenue is not germane or relevant consideration. Rather, under the Act the interest of the revenue is the primary consideration. No malice or bias is alleged by any of the respondents. The fact that the terms put forward by the petitioner have not been found by the respondents sufficient to safeguard the interest of the revenue is a good ground for the refusal. Sub-section (4) of section 3 in terms forbids the change of the " previous year ". Thus, there is no vested right which the petitioner can claim. The respondents have given the petitioner a very detailed hearing and have by applying the relevant consideration come to the conclusion that the interest of revenue would be prejudiced if change was to be permitted. It would in the circumstances be inexpedient for this court to sit in judgment over the decision taken by the appropriate authorites when no question of mala fides or arbitrariness arises. In my view, the petitioner has failed to show any reason for interference with the impugned order. The resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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